Circular Economy – The Next Big Thing?

circular economy

BERLIN, GERMANY - JANUARY 20: Greenshowroom/Ethical Fashion Show, at Postbahnhof Berlin, 20.01.2016: General view at the Ethical Fashion Show.
BERLIN, GERMANY – JANUARY 20: Greenshowroom/Ethical Fashion Show, at Postbahnhof Berlin, 20.01.2016: General view at the Ethical Fashion Show.

LO29635 Summer2014-circular02

A circular economy might just change our economic structure and provide practical solutions to our resource problems. The idea behind circular economy, or also known as a closed-loop economy, is to produce no waste and pollution, either by design or intention. It’s a restorative industrial economy where the aim is to rely on renewable energy, to minimise, track and eliminate the use of toxic chemicals and eradicate waste. Advocates, including Brad Pitt, Meryl Streep, and Susan Sarandon, are behind the movement calling on a deeper shift in our current economy. Some are saying that the future of economic growth lies in recycling, repurposing and reusing goods and resources. It’s not like the circular economy (or cradle-to-cradle economy as it’s also known) is a new concept – it’s philosophy echoes back to the great depression.

“We’ve always had a linear model. We dig it out of the ground, turn it into something, consume it and stick it back in the ground [as landfill]. The idea of a circular model is that once it’s out of the ground, it keeps circulating,” says James Moody, a panellist on the ABC’s The New Inventors show.

Economically speaking, a circular economy has its merits. The World Economic Forum estimates the economy could be worth $1 trillion worldwide and $26 billion in Australia by 2025. It’s been argued that the circular economy has the potential in stabilising issues of the growing tensions around geopolitical risk and supply risk (which contributes to volatile commodity prices) in the way it decouples economic growth from resource consumption.

Yet for UTS Institute for Sustainable Future’s (ISF) Damien Giurco, it is important that the economy is not branded as under the “green umbrella” for fear of alienating businesses.

“We’re careful not to brand it under a green umbrella. We need to engage businesses to say this is an economic opportunity [instead of thinking that] environment equals cost and regulation,” said Giurco in a Sydney Morning Herald article.

“To be sustainable, you must make money. The reason we can do it … is that waste is a resource,” said Rob Pascoe, Managing Director of Closed Loop Australia. Closed Loop Australia works with companies, including Qantas and KFC, on ways to reduce their waste.

But for many households, it’s not yet profitable and that needs to change. Part of this is because Australia’s economy is too focused upon the short-term benefits of the extractive economy rather than longer-term benefits through other industries. Another reason is that we, as a society, are culturally programmed to own and consume goods in a rather linear fashion. Renting products is not appealing to the mainstream and when it does appeal to individuals, it is appealing to a very narrow segment of the economy. One of the possible ways to drive the circular economy is changing the concept of renting where we ‘rent’ products on a ‘pay per use’ basis. This basis, currently popular for services like movie and music streaming services, could be extended to standard goods, such as washing machines, clothes and DIY equipment. The ‘products as services’ model allows companies to retain product ownership, which makes it easier for repairs, reuse and remanufacturing but would see responsibility extend to users as part of the purchase agreement. Companies, such as Philips, Kingfisher Group and Mud Jeans are already currently piloting the ‘products-as-services’ model.

The idea of ‘closed loop’ economy is already one that is making waves within the fashion industry. Within the fashion industry, we are seeing pioneers, start-ups and big players working on new concepts that see the production of yarns, materials and products in a continuous circle.

“We see potential when it comes to chemical recycling. But we need more innovation and more capacity in chemical recycling to provide for the possibility of cellulose and different synthetic fibres being reused,” said Henrik Lampa, H&M’s Environmental Sustainability Manager at Accenture’s Sustainability 24.

Circularity was recently one of the main themes of the recent Ethical Fashion Show in Berlin where labels such as Bleed, Navarpluma (Neokdun), Paramo, Patagonia, Primaloft and Pyua, exhibited some of their products produced within the circular economy.

Circularity is already being implemented within fashion label’s production line. Levi Strauss has programs that allow you to return your old clothes and shoes to any Levi’s store in the US, where they’ll be reused, repurposed or recycled.

“The opportunity [to do this] is tremendous. We’re aiming to establish an infrastructure that supports closed loop products by 2020. Our vision is to recycle your old Levi’s into new ones. And by doing this, we’ll reduce the impact of cotton agriculture by harvesting the denim from people’s closets that would otherwise end up as landfill,” wrote Michael Kobori, Levi Strauss’ Vice President of Social and Environmental Sustainability in a blog post.

A circular economy has the potential of radically changing the way we consume goods and services but it will need innovation and technology to find the answers to the questions posed by a growing a population.

By Sophia van Gent